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Unformatted text preview: generally has more information about the true financial position and results of operations of the entity than the absentee owner does. Materiality. The magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced. Misstatement. An instance where a financial statement assertion is not in accordance with the criteria against which it is audited (e.g., GAAP). Misstatements may be classified as fraud (intentional), other illegal acts such as noncompliance with laws and regulations (intentional or unintentional), and errors (unintentional). Reasonable assurance. The concept that an audit done in accordance with auditing standards may fail to detect a material misstatement in a client’s financial statements. In an auditing context this term has been defined to mean a high but not absolute level of assurance. Reporting. The end product of...
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